Slowing China, electronics sector weigh on IMI profit growth

Semiconductors and electronics producer Integrated Micro-Electronics Inc. (IMI) posted a weak 5-percent year-on-year rise in net income for the first nine months of 2015.

Company officials pointed to the global economic slowdown, especially in China, and a lackluster electronics industry, as factors behind the earnings weakness.

The publicly listed Ayala Corporation subsidiary registered a three-quarter gain of $22 million from $21 million in the comparable period last year.

“Despite the global economic slowdown and the electronics industry downturn, we remained profitable in the first nine months of the year,” IMI president Arthur Tan said. “Our gains resulted mainly from the company-wide operational efficiency improvements, as well as the expansion of some high-margin customer programs.”

Revenues decreased by four percent to $621.5 million from the same nine months in 2014 due to the “weak Euro and a downturn in the computing and telecommunications infrastructure segments.”

Aside from its Philippine operations, the electronics exporter is also operating in China, Singapore, Europe and Mexico.

Revenues of its Electronics Manufacturing Services (EMS) operations in the Philippines slightly grew by one percent to $168.5 million from $166.9 million last year, supported only by strong automotive and industrial businesses, which offset the decline in demand for storage devices.

Sales from IMI’s Europe and Mexico operations likewise inched up one percent to $204 million. If not for the weaker Euro, revenues in the two regions would have climbed 17 percent, the company said.

The firm’s China unit, meanwhile, declined by 13 percent to $214.3 million, owing to the telecommunications network rollout, as well as to lower orders from some consumer electronics customers.

“We expected the decline in telecom network infrastructure capital expenditure in China,” Tan said. “Fortunately, our businesses in the Philippines, Eastern Europe, and Mexico are doing well and compensate for the deficiency in the Chinese market.”

The slowdown in Chinese economy affects the company’s ability to gain new programs, but the IMI president is confident that “this will be short-lived.”

“The changes that are being implemented by the Chinese government are necessary for long term stability of their economy,” Tan opined. “China will continue to be a relevant world economic market and so, IMI will continue to be dependent on it.”

For the third quarter alone, the company declined six percent in revenues to $205.1 million from $219.09 million a year ago.

Its Philippine operations take up 25 percent of revenues, while the rest are from its international units, particularly 39 percent share from China and Singapore, and 32 percent from Europe and Mexico.

IMI has allotted P1.2 billion capital expenditures this year, sourced from the P1.6-billion raised funds from its follow-on offering on December 5 last year.